##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




FORM 10-KSB/A




(Mark One)

x Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended August 31, 2001.

o Transition report under section 13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from_________to____________.

Commission file number 0-18808

1st Realty Investments, Inc.


(Name of small business issuer as specified in its charter)


|                                                                      |  |                                             
|--------------------------------------------------------------------- |  | --------------------------------------------
|Nevada
(State or other jurisdiction
of incorporation or organization) |  | 13-3530765
(IRS Employer Identification No.)

|                                                                                            |  |                 
|------------------------------------------------------------------------------------------- |  | ----------------
|5115 N. Scottsdale Road, Suite 101, Scottsdale, AZ
(Address of principal executive offices) |  | 85250
(Zip Code)

Registrants telephone number: (480) 949-6007

Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Act:

Common Stock, Par Value $0.001
(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes   o   No   x

Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB.   o

The registrants revenues for the fiscal year ended August 31, 2001, were
$18,898.




There is currently no active trading market for the Registrants common stock.
There have been no trades of the Registrants common stock within the last 60
days. The aggregate value of the voting stock held by non-affiliates of the
registrant as of September 30, 2002 based on the par value of $0.001 per share
was $14,317.







The number of shares of the Registrants Common Stock outstanding at September
30, 2002 was 17,518,525.




DOCUMENTS INCORPORATED BY REFERENCE
None.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT:  Yes  o   No  x

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TABLE OF CONTENTS



|                          |                                                                                                                         |  |  |  |  |  |  | 
|------------------------- | ----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                   
|                          | Item 1. Business                                                                                                       
|                          | Item 2. Description of Property.                                                                                       
|                          | Item 3. Legal Proceedings                                                                                              
|                          | Item 4. Submission of Matters to a Vote of Security Holders.                                                           
|PART II                  
|                          | Item 5. Market for Common Equity and Related Stockholder Matters                                                       
|                          | Item 5(b). Recent Sales of Unregistered Securities                                                                     
|                          | Item 6. Managements Discussion and Analysis or Plan of Operation                                                      
|                          | Item 7. Financial Statements                                                                                           
|                          | Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                           
|PART III                 
|                          | Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
|                          | Item 10. Executive Compensation                                                                                        
|                          | Item 11. Security Ownership of Certain Beneficial Owners and Management                                                
|                          | Item 12. Certain Relationships and Related Transactions                                                                
|                          | Item 13. Exhibits and Reports on Form 8-K.                                                                             
|SIGNATURES               
|2001 10-KSB EXHIBIT INDEX
|EX-10.1                  
|EX-10.2                  
|EX-10.3                  
|EX-10.4                  
|EX-10.5                  
|EX-10.6                  
|EX-10.7                  
|EX-10.8                  
|EX-10.9                  
|EX-10.10                 
|EX-10.11                 
|EX-11                    
|EX-21                    
|EX-99.1                  



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TABLE OF CONTENTS




PART I




Item 1. Business

History

1st Realty Investments, Inc. (formerly First National Realty Associates,
Inc.) (the Company) is incorporated in the state of Nevada, We are an
Arizona-based company that was formed in Georgia in October 1988, and became a
publicly-held Nevada company through a merger into Emphatic Mergers, Inc. a
publicly-held corporation on April 11, 1990. We changed our name from First
National Realty Associates, Inc. to 1st Realty Investments, Inc. on July 13,
2000.

We were founded with the intended purpose of becoming primarily a national
residential real estate brokerage company, focusing on relatively affluent
markets in geographically diverse market areas. Between 1988 and 1991, we grew
primarily through the acquisition of other real estate brokerage companies in
multiple states. However, principally due to the downturn in the real estate
industry in the early 1990s, we were unable to generate profitable operations.
On April 6, 1992, we filed a voluntary petition in the United States Bankruptcy
Court for the District of Georgia to reorganize under Chapter 11 of the United
States Bankruptcy Code (the Bankruptcy Code). On January 21, 1993, we
voluntarily converted our petition to a case under Chapter 7 of the Bankruptcy
Code. All of our assets were subsequently liquidated and the proceeds
distributed, and the bankruptcy was dismissed on September 27, 1994. From that
date through the end of fiscal 2000, we had no operations. We did, however,
incur approximately $51,000 in administrative and legal expenses during that
time. We paid for these costs either by issuing common stock or through
advances we received from Great Western Land and Recreation, Inc. (Great
Western), formerly Amortibanc Management L.C.




In fiscal 2001, we began efforts to become an operating company once
again. On September 22, 2000, we purchased a $20,000 note receivable, issued
by an unrelated company in connection with a sale of real estate, bearing
interest at 9%. This note receivable was purchased from Great Western in
exchange for 500,000 shares of our common stock. On December 29, 2000, we
purchased ownership interests in nine entities from Great Western in exchange
for a $951,629 note payable and 1,000,000 shares of our common stock. The most
significant of these interests were a 25.52% ownership in Laguna at Arrowhead
Apartments L.L.C., (Laguna) which owns an apartment complex in Phoenix,
Arizona, and a 51% interest in Firebird Financial L.L.C, (Firebird Financial)
an entity that was formed to provide second mortgage financing in the Houston,
Texas area. Firebird Financial has not funded any new loans since 1998, and
does not have any current plans to fund additional loans in the future. The
other seven entities had no operations and minimal net asset values.







Great Western is a related company that owns 14.3% of our common stock as
of September 30, 2002.




We filed our last annual report on Form 10-K for the year ended August 31,
1991, and our last quarterly report on Form 10-Q for the quarter ended November
30, 1991, on or about December 13, 1991 and January 21, 1992, respectively. We
have not filed annual reports for the years ended August 31, 1992 through 2000,
or quarterly reports for the quarters ended February 28, 1992 through May 31,
2000. Quarterly reports for the quarters ended November 30, 2000 through
February 28, 2002 are being filed concurrently with this annual report on Form
10-KSB. Due to changes in personnel and the lack of availability of records
kept by such personnel prior to 2000, we have determined that certain of our
records for the fiscal years 1992 through 2000 are not available and therefore
not able to be audited and the cost of recreating and auditing such records, if
such recreation were possible, would not be justified in light of the age of
the information and its relevancy to our current operations. Therefore, we do
not intend to prepare or file annual or quarterly reports for the periods set
forth above through the year ended August 31, 2000.

Business Plan

Our business plan is to use our limited resources to search for,
investigate and acquire or participate in a business opportunity.

Regulation

The financing activities of Firebird Financial are subject to extensive
regulation, including regulation under the Truth-in-Lending Act, Regulation Z
(the Fair Housing Act), the Fair Debt Collection Practices Act, the Equal
Credit Opportunity Act, Regulation B (the Electronic Funds Transfer Act),
Regulation E (the Home Mortgage Disclosure Act), Regulation C (Unfair or
Deceptive Acts or Practices), Regulation AA and the Right to Financial Privacy
Act. In addition, Laguna must comply with various federal, state and local environmental, zoning and other statutes and regulations.

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We believe that we are in compliance in all material respects with
applicable regulations. However, these regulations are subject to change and we
cannot assess the cost of complying with all of the applicable laws and
regulations. Our failure to comply with applicable laws or regulations could
subject us to large fines or other costly activities to come into compliance.

Competition

The financing activities of Firebird Financial compete with banks,
mortgage companies, other financial institutions and government agencies
offering financing of real estate. However, Firebird Financial has not funded
any new loans since 1998, and does not have any current plans to fund
additional loans in the future.

Facilities

Our office is located at the office of Great Western, at 5115 N.
Scottsdale Road, Suite 101, Scottsdale, Arizona 85250. We are using this space
free of charge.

Employees

We have no employees. Our business and affairs are handled by directors
who provide services on an as needed basis. We may engage consultants,
attorneys, and accountants on a limited basis, and do not anticipate a need to
engage any full-time employees until we identify and consummate a transaction
with a business opportunity.




Item 2. Description of Property.

We do not own any property and conduct our limited operations from the
office of Great Western. (See Item 1. Description of Business: Facilities.)




Item 3. Legal Proceedings

We are not a party to any pending legal proceedings and, to the best of
our knowledge, no litigation by or against us has been threatened other than as
discussed below.

Great Western entered into a merger agreement with quepasa.com as of
August 6, 2001. In October 2001, in order to induce Great Western to amend and
extend the original merger agreement, quepasa.com loaned Great Western
$500,000. This loan was secured by 1st Realtys investment in Laguna. In
February 2002, the merger agreement was terminated. The merger agreement
provided for a termination fee of $500,000 as liquidated damages under certain
circumstances. Great Western believes that it is entitled to this termination
fee, which would result in the loan being deemed paid in full, and has filed a
declaratory judgment action against quepasa.com on that issue. quepasa.com has
filed a counterclaim, alleging that it is entitled to the termination fee and
seeking to foreclose on the loan. quepasa.com has named 1st Realty as a
third-party defendant to its counterclaim because 1st Realtys investment in
Laguna was pledged as collateral for the loan. Management does not believe that
the ultimate resolution of this matter will have a material adverse effect on
1st Realtys financial condition, results of operations or cash flows.




Item 4. Submission of Matters to a Vote of Security Holders.

None.




PART II




Item 5. Market for Common Equity and Related Stockholder Matters

There is currently no active trading market for our common stock, and
there can be no assurance that an active or liquid trading market for our
common stock will develop in the future.




We act as our own transfer agent. According to our records, at September
30, 2002, there were 7,593 holders of record of our common stock, including
broker-dealers and clearing firms holding shares on behalf of their clients.




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No dividends have ever been paid on our common stock, and we do not
anticipate paying dividends in the foreseeable future.







Item 5(b). Recent Sales of Unregistered Securities







In November of 1999, 1st Realty issued and sold an aggregate of 344,000
shares of common stock to William Szilagy (100,000 shares), Holly Rice (32,000
shares), Maxwell Hodgkins (72,000 shares) and Jay Torok (140,000 shares) in
exchange for past services valued at an aggregate of $3,440, without
registration under the Securities Act of 1933, as amended (the Securities
Act), in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act.







In August of 2000, 1st Realty issued and sold an aggregate of 88,000
shares of common stock to Great Northern Literary Society valued at $880, in
exchange for expenses of approximately the same amount paid by Great Northern
Literary Society on 1st Realtys behalf, without registration under the
Securities Act, in reliance upon the exemptions from registration provided by
Section 4(2) of the Securities Act.







In September and December 2000, respectively, 1st Realty issued to Great
Western 500,000 shares of common stock in exchange for a note receivable valued
at $20,000 and 1,000,000 shares of common stock in exchange for ownership
interests in nine entities valued at $10,000, without registration under the
Securities Act in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act.







Item 6. Managements Discussion and Analysis or Plan of Operation

Forward-Looking Statements




This Annual Report to Stockholders includes forward-looking statements.
Forward-looking statements are often characterized by the use of words such as
may, believes, plans, will, anticipates, estimates, expects, or
intends or by discussions of strategy, plans or intentions. All
forward-looking statements in this Annual Report to Stockholders are made based
on our current expectations and estimates, which involve risks, uncertainties
and other factors that could cause results to differ materially from those
expressed in forward-looking statements. You are cautioned not to place undue
reliance on any such forward-looking statements. We have no obligation to
publicly release the result of any revisions that may be made to any
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements. Forward-looking
statements involve a number of risks and uncertainties including, but not
limited to, general economic conditions, our ability to find a suitable company
to effect a business combination, competitive factors and other risk factors as
set forth in Exhibit 99.1 of this Annual Report to Stockholders and in our
other filings with the Securities and Exchange Commission.




Overview

On April 6, 1992, we filed a voluntary petition in the United States
Bankruptcy Court for the District of Georgia to reorganize under Chapter 11 of
the United States Bankruptcy Code. On January 21, 1993, we voluntarily
converted our petition to a case under Chapter 7 of the Bankruptcy Code. All of
our assets were subsequently liquidated and the proceeds distributed, and the
bankruptcy was dismissed on September 27, 1994. From that date through the end
of fiscal 2000, we had no operations. We did, however, incur approximately
$51,000 in administrative and legal expenses during that time. We paid for
these costs either by issuing common stock or through advances we received from
Great Western.




In fiscal 2001, we began efforts to become an operating company once
again. On September 29, 2000, we purchased a $20,000 note receivable issued by
an unrelated company in connection with a sale of real estate, bearing interest
at 9%. This note receivable was purchased from Great Western in exchange for
500,000 shares of common stock. On December 29, 2000, we purchased ownership
interests in nine entities from Great Western in exchange for a $951,629 note
payable and 1,000,000 shares of common stock. The most significant of these
interest were a 25.52% ownership in Laguna, which owns an apartment complex in
Phoenix, Arizona, and a 51% interest in Firebird Financial, an entity that was
formed to provide second mortgage financing in the Houston, Texas area.
Firebird Financial has not funded any new loans since 1998, and does not have
any current plans to fund additional loans in the future. The other seven
entities had no operations and minimal net asset values.







Great Western is a related company. Jay Torok, the Chairman of our board
of directors, is also the Chairman, President and Chief Executive Officer of
Great Western. William Szilagyi, our President and a member of our board of
directors is also the Senior Vice President of Great Western. Prior to
September 2000, Great Western owned 6.2% of our common stock. As a result of
the issuance




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of common stock to Great Western in September 2000 and December 2000
discussed above, Great Western owns 14.3% of our common stock as of September
30, 2002.




Our business plan is to use our limited resources to search for,
investigate and acquire or participate in a business opportunity.

Results of Operations

Year ended August 31, 2001 compared to year ended August 31, 2000

Interest income.Interest income was $18,898 in 2001 compared to zero in
2000. Interest income is related to the second mortgage notes receivable
carried by Firebird Financial and to a $20,000 note receivable we purchased
from Great Western. Firebird Financial was acquired in December 2000 and the
note receivable was purchased in September 2000.




General and administrative expense.General and administrative expense
increased $121,843 to $126,848 in 2001 from $5,005 in 2000. General and
administrative expense in 2001 consisted of $110,301 in charge-offs of
uncollectible notes receivable carried by Firebird Financial and $16,547 of
management, legal and accounting fees, primarily related to Firebird Financial.
General and administrative expense in 2000 consisted of legal and other
expenses. The charge-offs of uncollectible notes receivable were determined
based on the payment history, the value of the collateral and the status of the
borrower.




Interest Expense. Interest expense was $51,684 in 2001 compared to zero in
2000. The interest expense is related to the advances we received from Great
Western. In January 2001, interest at 8% per annum began to accrue on these
advances.




Equity in losses of unconsolidated company.Equity in losses of
unconsolidated company (Laguna) was $83,445 in 2001 compared to zero in 2000.
Laguna was purchased in December 2000. During 2001, Laguna was negatively
impacted by the opening of three new apartment complexes nearby, causing a
decrease in the occupancy levels at Laguna, and an increase in the level of
concessions offered to new tenants.




Liquidity and Capital Resources

Cash used in operating activities was $77,829 in 2001 compared to $685 in
2000. Cash used in operations in 2001 consisted of our net loss of $243,079, an
increase in other assets of $1,587 and a decrease in accounts payable and other
accrued liabilities of $17,452 offset by net non-cash expenses of $184,289. Net
non-cash expenses consisted of $110,301 in bad debt expense, $83,445 in
undistributed losses related to our equity investment in Laguna and $1,624 in
depreciation and amortization expense offset by $11,081 of accretion of
interest income.

Cash provided by investing activities was $96,651 in 2001 compared to $-0-
in 2000. Cash provided by investing activities in 2001 consisted of a
distribution of capital from Laguna of $31,900, cash acquired through purchase
of investments in businesses of $18,632 and collections of notes receivable of
$46,119. Our investments in businesses were financed by a $951,629 advance from
Great Western and by the issuance to Great Western of 1,000,000 shares of
common stock.

Cash used in financing activities was $13,023 in 2001 compared to cash
provided of $685 in 2000. Cash used in financing activities in 2001 consisted
of a net decrease in advances from related parties.




At August 31, 2001, notes receivable, net of unamortized discount, total
$178,623. Many of these notes are seriously delinquent, with the status ranging
from current to 38 months delinquent. We evaluate the collectibility of these
notes based on the payment history, the value of the collateral and the status
of the borrower. If we believe the collectibility of a note to be in doubt, we
establish a specific reserve for that note. In addition, we have provided an
allowance for estimated losses in the remaining portfolio of performing loans
based on the same criteria. At August 31, 2001, our allowance for doubtful
accounts totals $110,301.




Our cash balance at August 31, 2001 was $5,799. Our limited cash
requirements have been funded primarily by advances from Great Western. We
cannot presently foresee the cash requirements of any business opportunities
that we may ultimately acquire. However, since it is likely that any business
we acquire will be involved in active business operations, we anticipate that
an acquisition will result in increased cash requirements as well as increases
in the number of employees.

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Recent Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets: (SFAS 144). SFAS 144 requires that all
long-lived assets (including discontinued operations) that are to be disposed
of by sale be measured at the lower of book value or fair value less cost to
sell. Additionally, SFAS 144 expands the scope of discontinued operations to
include all components of an entity with operations that can be distinguished
from the rest of the entity and will be eliminated from the ongoing operations
of the entity in a disposal transaction. SFAS 144 is effective for us as of
January 1, 2002. We do not expect the implementation of SFAS 144 to have a
material effect on our financial condition or results of operations.




Item 7. Financial Statements

The consolidated financial statements of the Company listed in the index
appearing under Item 13(a)(1) hereof are filed as part of this Annual Report on
Form 10-KSB and are hereby incorporated by reference in this Item 7. See also
Index to Consolidated Financial Statements on page F-1 hereof.




Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Prior to August 31, 1991 our financial statements were audited by Deloitte
& Touche. From our fiscal year ended August 31, 1991 through our fiscal year
ended August 31, 2000 we did not have operations and did not have the funds to
pay to have our financial statements audited. In February 2002, we engaged
Grant Thornton LLP to audit our financial statements for the year ended August
31, 2001.

Our audit opinion for the year ended August 31, 1991 contained an
unqualified opinion. Our decision to retain Grant Thornton, LLP was approved by
our board of directors. We had no disagreements with Deloitte & Touche on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure.




PART III




Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act

Directors and Executive Officers

The following table sets forth information regarding our current executive
officers and directors:

|                 |  |     |    |        |  |                            |  |  |      |            |  | 
|---------------- |  | --- | -- | ------ |  | -------------------------- |  |  | ---- | ---------- |  | 
|                 |  |     |    |        |  |                            |  |  |      | Officer or
|Name             |  | Age |    | Office |  | Director Since            
|                 |  |     |    |        |  |                           
|Jay N. Torok     |  |     | 62 |        |  | Chairman                   |  |  | 1994 |           
|                
|                
|                
|                
|William Szilagyi |  |     | 56 |        |  | President and Board member |  |  | 1988 |           
|                
|                
|                
|                
|Roger B. Clark   |  |     | 67 |        |  | Board member               |  |  | 1989 |           

Our board of directors currently consists of three members. All directors
hold office until the next Annual Stockholders Meeting or until their death,
resignation, retirement, removal, disqualification, or until their successors
have been elected and qualified. Vacancies in the existing board are filed by
majority vote of the remaining directors. A summary of the background and
experience of each of these individuals follows

Jay N. Torok served as Chairman of our board of directors, President and
Chief Executive Officer from our inception in 1988 until early 1992. He again
agreed to serve as our Chairman in 1994, and has held that position since that
date. During these periods, Mr. Torok served in various positions with our
subsidiary companies, including First National Realty Associates of Georgia,
Inc. and Hamer Holding Group, Inc. In mid-1992, together with these
subsidiaries, we filed voluntary petitions to reorganize under Chapter 11 of
the Bankruptcy Code. All petitions were voluntarily converted to Chapter 7
liquidations and the companies assets were liquidated and distributed in 1994.
Mr. Torok currently serves as the President and Chief Executive Officer of
Amortibanc Management, L.C. since 1993 and as Chairman of the Board, President
and Chief Executive Officer of Great Western since its inception. In addition
Mr. Torok has served as Executive Vice President of Amortibanc, Inc. and
President of Amortibanc Land and Cattle, L.L.C., Southwest Land and Cattle,
L.L.C. and Firebird Financial, L.L.C., as well as other Amortibanc affiliates
engaged in real estate development or venture capital. Prior to joining the
Amortibanc group of companies, from 1986 to 1992, Mr. Torok served as President
and Chief Executive Officer of Lone Pine Capital, a venture capital company
specialized in acquisitions management. Prior to joining Lone Pine

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Capital, from 1981 to 1985, Mr. Torok served as President and Chief
Executive Officer of Merrill Lynch Realty, Inc. Under Mr. Toroks management,
Merrill Lynch Realty, Inc. grew from 100 offices to over 380 offices in 38
cities in the United States and four foreign cities, becoming the worlds
largest real estate brokerage firm. Prior to joining Merrill Lynch Realty,
Inc., Mr. Torok served in various positions, including President of the
Container and Core Division of Clevepak Corporation, a former NYSE listed
company, President of Associated Forest Products, Inc., Vice President of
Finance of Wausau Paper Mills, a Nasdaq quoted company and Controller of the
Forest Products Division and the Land Development Division of Owens Illinois,
Inc., a Fortune 100 company. Mr. Torok received his M.B.A. from Dartmouth in
1962 and attended law school at Temple University.







William Szilagyi has served as a member of our board of directors since
1988. From our inception in 1988 until 1990 he was our Executive Vice
President, and in 1991 he became our President and Chief Operating Officer.
During this period, Mr. Szilagyi served in various positions with our
subsidiary companies, including First National Realty Associates of Georgia,
Inc. and Hamer Holding Group, Inc. In 1992, together with these subsidiaries,
we filed voluntary petitions to reorganize under Chapter 11 of the Bankruptcy
Code. All petitions were voluntarily converted to Chapter 7 liquidations and
the companies assets were liquidated and distributed in 1994. Mr. Szilagyi
currently serves as the Vice President of Operations of Amortibanc Management
since 1996 and senior vice president of Great Western since its inception.
Since 1998, Mr. Szilagyi has also served as the President of UniLoan, a
mortgage brokerage company specializing in the needs of new homebuilders and
since 1998 as Vice President and Director of Firebird Financial, L.L.C., a
mortgage investment company. Prior to joining the Amortibanc group of
companies, Mr. Szilagyi served as President of Merrill Lynch Realty, Inc. /
Beach Cities Company in California. During his tenure with Merrill Lynch
Realty, Inc., Mr. Szilagyi developed a Real Estate Owned Division to address
the needs of bank owned properties, turned around multiple unprofitable
subsidiaries and created a Resorts Division that managed and marketed resort
properties throughout the West. In addition, while with Merrill Lynch Realty,
Inc., Mr. Szilagyi created a multilingual international real estate network
that targeted properties in Central and South America, Mexico, Canada and the
Pacific Rim. Mr. Szilagyi, also served as Marketing Director with Merrill Lynch
Realty Associates, Inc. where he wrote the companys Policy and Procedure
Manual and New Sales Associate Training and Marketing Manual. Prior to that,
Mr. Szilagyi was employed by the Forest E. Olsen Company, a Coldwell Banker
company, where he supervised 18 real estate offices in the greater Los Angeles
metropolitan area. Mr. Szilagyi received his degree in business from California
State University in 1967. Mr. Szilagyi has written two books and given numerous
seminars on the advantages of real property ownership and investment.




Roger B. Clark has served as a member our board of directors since 1990.
Mr. Clark has been president and chief executive officer of GlennCon, Inc. a
leading supplier of goods and services to the worldwide public gaming industry
since 1984. From 1970 to 1983, Mr. Clark served in several positions with
Glendinning Companies, including president of Glendinning Companies, North
America from 1978-83, during which time he was responsible for all U.S.
operations, including the consulting, retail promotion, telecom and lottery
divisions. Prior to that, Mr. Clark was employed by Procter & Gamble. Mr. Clark
received his degree in economics from Amherst College in 1955.

Section 16(a) Beneficial Ownership Reporting Compliance




Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who own more than 10% of a
registered class of our equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of equity securities of the Company. Officers, directors, and greater
than 10% stockholders are required to furnish us with copies of all Section
16(a) forms they file. We have not received any copies of such forms during the
year ended August 31, 2001. Based solely on a review of our transfer books, we
believe that each person who, at any time during such fiscal year, was a
director, officer or beneficial owner of more than 10% of our common stock
complies with all Section 16(a) filing requirements during such fiscal year,
except that Jay N. Torok and William Szilagyi received 140,000 and 100,000
shares, respectively, of common stock in November 1999 for services rendered to
us and each of Jay N. Torok, William Szilagyi and Roger B. Clark received
vested stock warrants in November 1999 to purchase 250,000 shares of common
stock.







Item 10. Executive Compensation




We have not paid any compensation to any officer or director during the
past three years, however we have granted stock options and restricted stock to
our officers and directors during the past three years. In November 1999, we
granted 140,000 shares of restricted stock, with an estimated value of $1,400
to our Chairman, Jay N. Torok, and 100,000 shares of restricted stock, with an
estimated value of $1,000 to our president, William Szilagyi, for services
rendered to the Company. Also in November 1999, we granted stock options with
an exercise price of $0.10 per share to the following officers and directors:




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|                 |  |              |         |              |  |          |      |            |  |      |      |            |  |     |           |  |  |                      |           |  |  |                      |   |  |  |   |   | 
|---------------- |  | ------------ | ------- | ------------ |  | -------- | ---- | ---------- |  | ---- | ---- | ---------- |  | --- | --------- |  |  | -------------------- | --------- |  |  | -------------------- | - |  |  | - | - | 
|                 |  |              |         |              |  |          |      |            |  |      |      |            |  |     |           |  |  |                      |           |  |  | Potential Realizable
|                 |  |              |         |              |  |          |      |            |  |      |      |            |  |     |           |  |  |                      |           |  |  | Value at Assumed    
|                 |  | Number of    |         | Percent of   |  |          |      |            |  |      |      |            |  |     |           |  |  | Annual Rate of      
|                 |  | Shares of    |         | Total        |  |          |      |            |  |      |      |            |  |     |           |  |  | Stock Price         
|                 |  | Common Stock |         | Options      |  |          |      |            |  |      |      |            |  |     |           |  |  | Appreciation for the
|                 |  | Underlying   |         | Granted to   |  |          |      |            |  |      |      |            |  |     |           |  |  | Option Term         
|                 |  | Options      |         | Employees in |  | Exercise |      |            |  |      |      | Expiration |  |    
|Name             |  | Granted      |         | Fiscal Year  |  | Price    |      | Grant Date |  | Date |      | 5%         |  | 10%
|                 |  |              |         |              |  |          |      |            |  |      |      |            |  |    
|Jay N. Torok     |  |              | 250,000 |              |  |          | 33.3 | %          |  | $    | 0.10 |            |  |     | 11/2/1999 |  |  |                      | 11/2/2009 |  |  | $                    |  |  |  | $ |  | 
|                
|                
|                
|                
|William Szilagyi |  |              | 250,000 |              |  |          | 33.3 | %          |  | $    | 0.10 |            |  |     | 11/2/1999 |  |  |                      | 11/2/2009 |  |  | $                    |  |  |  | $ |  | 
|                
|                
|                
|                
|Roger B. Clark   |  |              | 250,000 |              |  |          | 33.3 | %          |  | $    | 0.10 |            |  |     | 11/2/1999 |  |  |                      | 11/2/2009 |  |  | $                    |  |  |  | $ |  | 

These options were granted under our stock option plan and were fully
vested and exercisable on the date of grant. None of our officers or directors
exercised options to purchase our common stock during the past three years.

We currently have no retirement, pension, profit sharing, or insurance or
medical reimbursement plans covering our officers or directors.

We have not made or contemplated making any advances to any of our
officers or directors.




Item 11. Security Ownership of Certain Beneficial Owners and Management




The following table sets forth certain information as of August 31, 2001
concerning ownership of our common stock by each director and officer, by all
persons who hold of record or are known by us to hold beneficially of record 5%
or more of our outstanding shares and by all directors and officers as a group.
On June 15, 2002 there were 17,518,525 shares of our common stock outstanding
and entitled to vote.







|                                                            |                                               |           |              |             |            |  |      |      |  
|----------------------------------------------------------- | --------------------------------------------- | --------- | ------------ | ----------- | ---------- |  | ---- | ---- | -
|                                                            |                                               |           | Shares       |             | Percent of
|                                                            |                                               |           | Beneficially |             | Shares    
|Name and Address of Beneficial Owner                        |                                               | Owned (1) |              | Outstanding
|                                                            |                                               |           |              |            
|Five Percent Shareholders:                                  |                                               |           |              |             |            |  |      |     
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | David Theroux (2)                             |           |              | 2,033,424   |            |  |      | 11.6 | %
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Great Western Land and Recreation, Inc.(3)    |           |              | 2,500,000   |            |  |      | 14.3 | %
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Amortibanc Investments, L.C. (3)(6)           |           |              | 2,500,000   |            |  |      | 14.3 | %
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Willard W. Garvey Revocable Trust(3)(6)       |           |              | 2,500,000   |            |  |      | 14.3 | %
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Willard W. Garvey Trust Number Thirteen(3)(6) |           |              | 2,500,000   |            |  |      | 14.3 | %
|                                                           
|                                                           
|                                                           
|                                                           
|Directors and Executive Officers:                           |                                               |           |              |             |            |  |      |     
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Jay. N Torok(4)(7)                            |           |              | 1,839,336   |            |  |      | 10.4 | %
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | William Szilagyi(4)(8)                        |           |              | 1,346,521   |            |  |      | 7.6  | %
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Roger B. Clark(5)(9)                          |           |              | 765,810     |            |  |      | 4.3  | %
|                                                           
|                                                           
|                                                           
|                                                           
|All Directors and Executive Officers as a Group (3 persons) |                                               |           | 3,951,667    |             |            |  | 21.6 | %   






---

|(1) |  | In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
a person is deemed to be the beneficial owner, for purposes of this table,
of any shares of common stock if such person has or shares voting power or
investment power with respect to such security, or has the right to
acquire beneficial ownership at any time within 60 days after June 15,
2002. In calculating the percentage of ownership, such shares are deemed
to be outstanding for the purpose of computing the percentage of shares of
common stock owned by such stockholder, but are not deemed outstanding for
the purpose of computing the percentage of shares of common stock owned by
any other stockholder. For purposes of this table, voting power is the
power to vote or direct the voting of shares and investment power is the
power to dispose or direct the disposition of shares.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | The address for David Theroux is 300 West Douglas, Suite 422, Wichita, KS
67202.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|   
|   
|   
|   
|(3) |  | The address for Great Western Land and Recreation, Inc. is 5115 N.
Scottsdale Road, Suite 101, Scottsdale, AZ 85250. The address for
Amortibanc Investments L.C., the Willard Garvey Revocable Trust and the
Willard W. Garvey Trust Number Thirteen is 300 West Douglas, Suite 422,
Wichita, KS 67202.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|   
|   
|   
|   
|   
|(4) |  | The address for Messrs. Torok and Szilagyi is 5115 North Scottsdale Road,
Suite 101, Scottsdale, AZ 85250.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|   
|   
|   
|   
|   
|(5) |  | The address for Mr. Clark is 6 Cardinal Road, Hilton Head, SC 29926.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|   
|   
|   
|   
|   
|(6) |  | Includes 2,500,000 shares owned by Great Western Land and Recreation,
Inc. Amortibanc Investments, L.C. beneficially owns                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   

8



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##### Table of Contents



|    |  | 100% of the outstanding shares of Great Western Land and Recreation.
Amortibanc Investments disclaims beneficial ownership of these shares. The
Willard W. Garvey Revocable Trust and the Willard W. Garvey Trust Number
Thirteen are the only members of Amortibanc Investments and thereby share
beneficial ownership of these shares. Jean Garvey is the trustee of the
Willard W. Garvey Revocable Trust and the Willard W. Garvey Trust Number
Thirteen.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(7) |  | Includes 1,328,556 shares of common stock owned by Mr. Torok, 81,320
shares owned by Lone Pine Industries, Inc., a company controlled by Mr.
Torok, 179,460 shares owned by Western Reserve Environmental Services, a
company in which Mr. Torok has an interest, primarily in a joint trust
with Anne V. Hodgkins, Mr. Toroks wife, and 250,000 shares of common
stock issuable upon the exercise of vested stock options.                                 
|   
|   
|   
|   
|(8) |  | Includes 1,096,521 shares of common stock owned by Mr. Szilagyi and
250,000 shares of common stock issuable upon the exercise of vested stock
options.                                                                                                                                                                                                                                                                                                       
|   
|   
|   
|   
|(9) |  | Includes 500,000 shares of common stock owned by Mr. Clark, 15,810 shares
owned by Clark-Bemis Lumber Company, a company controlled by Mr. Clark,
and 250,000 shares of common stock issuable upon the exercise of vested
stock options.                                                                                                                                                                                                                     




Item 12. Certain Relationships and Related Transactions




On September 22, 2000, we purchased a $20,000 note receivable, issued by
an unrelated company in connection with a sale of real estate, bearing interest
at 9%. This note receivable was purchased from Great Western in exchange for
500,000 shares of our common stock. On December 29, 2000, we purchased
ownership interests in nine entities from Great Western in exchange for a
$951,629 note payable and 1,000,000 shares of our common stock. The most
significant of these interests were a 25.52% ownership in Laguna which owns an
apartment complex in Phoenix, Arizona, and a 51% interest in Firebird
Financial, an entity that was formed to provide second mortgage financing in
the Houston, Texas area. Firebird Financial has not funded any new loans since
1998, and does not have any current plans to fund additional loans in the
future. The other seven entities had no operations and minimal net asset
values. In addition, Great Western charges us $900 per month for management
services it provides to Firebird Financial. Furthermore, Great Western advances
us funds to pay our current expenses. At August 31, 2001, advances from Great
Western totaled $1,051,688, primarily to finance the purchase of the Companys
ownership interests in Laguna and Firebird Financial from Great Western. We
have also pledged our interest in Laguna as collateral for of a $500,000 loan
Great Western received from a third party (see Item 3. Legal Proceedings and
Item 13. Notes to Consolidated Financial Statements, Note J).




Jay Torok, the Chairman of our board of directors, is also the Chairman,
President and Chief Executive Officer of Great Western. William Szilagyi, our
president and a member of our board of directors is also the Senior Vice
President of Great Western.

We utilize office space at the office of Great Western. We are using this
space free of charge.

9



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##### Table of Contents






Item 13. Exhibits and Reports on Form 8-K.



| | (a) |  | The following documents are filed as part of this Annual Report on
Form 10-KSB:
| | --- |  | -------------------------------------------------------------------------------



| | (1) |  | Consolidated Financial Statements
| | --- |  | ---------------------------------

|                                                                                                       |  |          |     | 
|------------------------------------------------------------------------------------------------------ |  | -------- | --- | 
|                                                                                                       |  | Page No.
|                                                                                                       |  |         
|Report of Independent Certified Public Accountants                                                     |  |          | F-2 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Balance Sheet as of August 31, 2001                                                       |  |          | F-3 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Statements of Operations for the years ended August 31, 2001 and 2000                     |  |          | F-4 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Statements of Stockholders Equity (Deficit) for the years ended
August 31, 2001 and 2000 |  |          | F-5 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Consolidated Statements of Cash Flows for the years ended August 31, 2001 and 2000                     |  |          | F-6 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Notes to Consolidated Financial Statements                                                             |  |          | F-7 | 



| | (2) |  | Exhibits
| | --- |  | --------



| |  |  | The Exhibits which are filed with this Annual Report or which are
incorporated herein by reference are set forth in the Exhibit Index
which appears on page E-1 hereof, which Exhibit Index is incorporated
herein by reference
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | No reports on Form 8-K were filed during fiscal 2001.
| | --- |  | -----------------------------------------------------

10



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##### Table of Contents






SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|                       |  |                            
|---------------------- |  | ---------------------------
|                      
|                       |  | 1ST REALTY INVESTMENTS, INC
|                      
|                      
|                      
|                      
|                       |  | (Registrant)               
|                      
|                      
|                      
|                      
|Date: October  6, 2002 |  | By /s/ Jay N. Torok        
|                      
|                      
|                      
|                      
|                       |  | Jay N. Torok               
|                      
|                      
|                      
|                      
|                       |  | Chairman of the Board      
|                      

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|                                       |  |                                                                                    |  |                 
|-------------------------------------- |  | ---------------------------------------------------------------------------------- |  | ----------------
|                                      
|Signatures                             |  | Title                                                                              |  | Date            
|                                       |  |                                                                                    |  |                 
|/s/ Jay N. Torok 
Jay N. Torok         |  | Chairman of the Board (Principal Executive Officer;                                |  | October  6, 2002
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                    |  |                 
|                                      
|                                      
|                                      
|                                      
|/s/ William Szilagyi 
William Szilagyi |  | President and Director (Principal Financial
Officer; Principal Accounting Officer) |  | October  6, 2002
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                    |  |                 
|                                      
|                                      
|                                      
|                                      
|/s/ Roger B. Clark 
Roger B. Clark     |  | Director                                                                           |  | October  6, 2002
|                                      

11



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##### Table of Contents



1ST REALTY INVESTMENTS, INC.

CONTENTS

|                                                                                                                |  |      |     | 
|--------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                |  | PAGE
|                                                                                                                |  |     
|- Report of Independent Certified Public Accountants                                                            |  |      | F-2 | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|- Consolidated Balance Sheet, August 31, 2001                                                                   |  |      | F-3 | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|- Consolidated Statements of Operations, for the fiscal years ended
August 31, 2001 and 2000                    |  |      | F-4 | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|- Consolidated Statements of Stockholders Equity (Deficit) for the
fiscal years ended August 31, 2001 and 2000 |  |      | F-5 | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|- Consolidated Statements of Cash Flows, for the fiscal years ended
August 31, 2001 and 2000                    |  |      | F-6 | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|- Notes to Consolidated Financial Statements                                                                    |  |      | F-7 | 

F-1



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##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors

1st Realty Investments

We have audited the accompanying consolidated balance sheet of 1st Realty
Investments, Inc. as of August 31, 2001, and the related consolidated
statements of operations, stockholders equity (deficit) and cash flows for
each of the two years in the period ended August 31, 2001. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of 1st Realty
Investments as of August 31, 2001 and the consolidated results of its
operations and its consolidated cash flows for each of the two years in the
period ended August 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.

GRANT THORNTON LLP

Fountain Hills, Arizona
April 16, 2002

F-2



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##### Table of Contents



1ST REALTY INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
August 31, 2001

|                                               |                                      |                                                |                                      |         |           |           |  
|---------------------------------------------- | ------------------------------------ | ---------------------------------------------- | ------------------------------------ | ------- | --------- | --------- | -
|ASSETS                                         |                                      |                                                |                                      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents            |                                                | $                                    | 5,799   |          
|                                              
|                                              
|                                              
|                                              
|                                               | Notes receivable, net                |                                                |                                      | 68,322  |          
|                                              
|                                              
|                                              
|                                              
|                                               | Property and equipment, net          |                                                |                                      | 698     |          
|                                              
|                                              
|                                              
|                                              
|                                               | Investment in unconsolidated company |                                                |                                      | 760,987 |          
|                                              
|                                              
|                                              
|                                              
|                                               | Other assets                         |                                                |                                      | 14,436  |          
|                                               |                                      |                                                |                                      |        
|                                               |                                      | $                                              | 850,242                              |        
|                                               |                                      |                                                |                                      |        
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                      |                                                |                                      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Liabilities                          |                                                |                                      |         |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Payable to related entities                    |                                      | $       | 1,065,534 |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Accounts payable and other accrued
liabilities |                                      |         | 15,628    |          
|                                               |                                      |                                                |                                      |        
|                                               |                                      |                                                | Total liabilities                    |         |           | 1,081,162 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Stockholders equity (deficit)       |                                                |                                      |         |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Common stock, $0.001 par value;                |                                      |         |           |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                                                | 25,000,000 shares authorized;        |         |           |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                                                | 17,518,525 shares issued             |         | 17,519    |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Additional paid-in capital                     |                                      |         | 45,401    |          
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Accumulated deficit                            |                                      |         | (293,840  | )        
|                                              
|                                              
|                                              
|                                              
|                                               |                                      | Treasury stock, at cost, 651,972 shares        |                                      |         |          |          
|                                               |                                      |                                                |                                      |        
|                                               |                                      |                                                | Total stockholders
equity (deficit) |         |           | (230,920  | )
|                                               |                                      |                                                |                                      |        
|                                               |                                      | $                                              | 850,242                              |        
|                                               |                                      |                                                |                                      |        

The accompanying notes are an integral part of this consolidated financial statement.

F-3



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##### Table of Contents



1ST REALTY INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                 |                                            |   |                              |            |      |   |        |            |  
|---------------------------------------------------------------- | ------------------------------------------ | - | ---------------------------- | ---------- | ---- | - | ------ | ---------- | -
|                                                                 |                                            |   | Fiscal year ended August 31,
|                                                                 |                                            |   |                             
|                                                                 |                                            |   | 2001                         |            | 2000
|                                                                 |                                            |   |                              |            |     
|Interest income                                                  |                                            | $ | 18,898                       |            |      | $ |       |           
|                                                                
|                                                                
|                                                                
|                                                                
|General and administrative expense                               |                                            |   | 126,848                      |            |      |   | 5,005  |           
|                                                                 |                                            |   |                              |            |      |   |        |           
|                                                                 | Operating loss                             |   |                              | (107,950   | )    |   |        | (5,005     | )
|                                                                
|                                                                
|                                                                
|                                                                
|Other expense                                                    |                                            |   |                              |            |      |   |        |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Interest expense                           |   |                              | (51,684    | )    |   |        |           |  
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Equity in losses of
unconsolidated company |   |                              | (83,445    | )    |   |        |           |  
|                                                                 |                                            |   |                              |            |      |   |        |           
|                                                                 |                                            |   | (135,129                     | )          |      |   |       |           
|                                                                 |                                            |   |                              |            |      |   |        |           
|Net loss                                                         |                                            | $ | (243,079                     | )          |      | $ | (5,005 | )         
|                                                                 |                                            |   |                              |            |      |   |        |           
|Net loss per common and common equivalent share                  |                                            |   |                              |            |      |   |        |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Basic                                      |   | $                            | (0.01      | )    |   | $      |           |  
|                                                                 |                                            |   |                              |            |      |   |        |           
|                                                                 | Diluted                                    |   | $                            | (0.01      | )    |   | $      |           |  
|                                                                 |                                            |   |                              |            |      |   |        |           
|Weighted average common and common equivalent
shares outstanding |                                            |   |                              |            |      |   |        |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Basic                                      |   |                              | 17,154,141 |      |   |        | 16,018,525 |  
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Diluted                                    |   |                              | 17,154,141 |      |   |        | 16,018,525 |  

The accompanying notes are an integral part of these consolidated financial statements.

F-4



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##### Table of Contents



1ST REALTY INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
Fiscal years ended August 31, 2001 and 2000

|                           |                                               |  |              |           |            |   |             |          |         |   |        |        |       |   |          |          |   |   |   |   |  |   |          |          |  
|-------------------------- | --------------------------------------------- |  | ------------ | --------- | ---------- | - | ----------- | -------- | ------- | - | ------ | ------ | ----- | - | -------- | -------- | - | - | - | - |  | - | -------- | -------- | -
|                           |                                               |  | Common stock |           | Additional |   |             |          |         |   |        |        |       |   |          |          |  
|                           |                                               |  |              |           | paid-in    |   | Accumulated | Treasury |        
|                           |                                               |  | Shares       |           | Amount     |   | capital     |          | deficit |   | stock  |        | Total
|                           |                                               |  |              |           |            |   |             |          |         |   |        |        |      
|Balance, September 1, 1999 |                                               |  | 15,586,525   |           |            | $ | 15,587      |          |         | $ | 13,013 |        |       | $ | (45,756  | )        |   | $ |  |   |  | $ | (17,156  | )       
|                          
|                          
|                          
|                          
|                           | Issuance of shares in
payment of expenses     |  |              | 432,000   |            |   |             | 432      |         |   |        | 3,888  |       |   |          |         |   |   |   |  |  |   |          | 4,320    |  
|                          
|                          
|                          
|                          
|                           | Net loss                                      |  |              |          |            |   |             |         |         |   |        |       |       |   |          | (5,005   | ) |   |   |  |  |   |          | (5,005   | )
|                           |                                               |  |              |           |            |   |             |          |         |   |        |        |       |   |          |          |   |   |   |   |  |   |          |         
|Balance, August 31, 2000   |                                               |  | 16,018,525   |           |            |   | 16,019      |          |         |   | 16,901 |        |       |   | (50,761  | )        |   |   |  |   |  |   | (17,841  | )       
|                          
|                          
|                          
|                          
|                           | Issuance of shares to
acquire note receivable |  |              | 500,000   |            |   |             | 500      |         |   |        | 19,500 |       |   |          |         |   |   |   |  |  |   |          | 20,000   |  
|                          
|                          
|                          
|                          
|                           | Issuance of shares to
acquire businesses      |  |              | 1,000,000 |            |   |             | 1,000    |         |   |        | 9,000  |       |   |          |         |   |   |   |  |  |   |          | 10,000   |  
|                          
|                          
|                          
|                          
|                           | Net loss                                      |  |              |          |            |   |             |         |         |   |        |       |       |   |          | (243,079 | ) |   |   |  |  |   |          | (243,079 | )
|                           |                                               |  |              |           |            |   |             |          |         |   |        |        |       |   |          |          |   |   |   |   |  |   |          |         
|Balance, August 31, 2001   |                                               |  | 17,518,525   |           |            | $ | 17,519      |          |         | $ | 45,401 |        |       | $ | (293,840 | )        |   | $ |  |   |  | $ | (230,920 | )       
|                           |                                               |  |              |           |            |   |             |          |         |   |        |        |       |   |          |          |   |   |   |   |  |   |          |         

The accompanying notes are an integral part of these consolidated financial statements.

F-5



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##### Table of Contents



1ST REALTY INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |        |       |       |      |  
|------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | ------- | ---------------------------- | ------- | ------ | ----- | ----- | ---- | -
|                                                  |                                                                                                     |                                                 |                                           |         | Fiscal year ended August 31,
|                                                  |                                                                                                     |                                                 |                                           |         |                             
|                                                  |                                                                                                     |                                                 |                                           |         | 2001                         |         | 2000  
|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |       
|Cash flows from operating activities              |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|                                                  | Net loss                                                                                            | $                                               | (243,079                                  | )       |                              | $       | (5,005 | )    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Adjustments to reconcile net loss to net cash
used in operating activities                          |                                                 |                                           |         |                              |         |        |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                     | Bad debt expense                                |                                           |         | 110,301                      |         |        |       |      |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                     | Depreciation and amortization                   |                                           |         | 1,624                        |         |        |       |      |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                     | Undistributed losses of unconsolidated company  |                                           |         | 83,445                       |         |        |       |      |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                     | Accretion of interest income                    |                                           |         | (11,081                      | )       |        |       |      |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                     | Issuance of common stock in payment of expenses |                                           |         |                             |         |        |       | 4,320 |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Change in assets and liabilities (net of businesses acquired):                                      |                                                 |                                           |         |                              |         |        |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                     | Other assets                                    |                                           |         | (1,587                       | )       |        |       |      |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                     | Accounts payable and other accrued liabilities  |                                           |         | (17,452                      | )       |        |       |      |     
|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|                                                  |                                                                                                     |                                                 | Net cash used in operating activities     |         |                              | (77,829 | )      |       |       | (685 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Cash flows from investing activities              |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Collection of notes receivable                                                                      |                                                 |                                           | 46,119  |                              |         |        |      |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Distribution of capital from unconsolidated company                                                 |                                                 |                                           | 31,900  |                              |         |        |      |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash acquired through purchase of investments in businesses                                         |                                                 |                                           | 18,632  |                              |         |        |      |      
|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|                                                  |                                                                                                     |                                                 | Net cash provided by investing activities |         |                              | 96,651  |        |       |       |     |  
|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|Cash
flows from financing activities              |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Increase (decrease) in advances from related parties                                                |                                                 |                                           | (13,023 | )                            |         |        | 685   |      
|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|Net increase in cash and cash equivalents         |                                                                                                     |                                                 | 5,799                                     |         |                              |         |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|Cash and cash equivalents at beginning of period  |                                                                                                     |                                                 |                                          |         |                              |         |       |      
|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|Cash and cash equivalents at end of period        |                                                                                                     | $                                               | 5,799                                     |         |                              | $       |       |      
|                                                  |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|Supplemental disclosure of cash flow information: |                                                                                                     |                                                 |                                           |         |                              |         |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|Cash paid during the year for interest            |                                                                                                     | $                                               |                                          |         |                              | $       |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|Noncash investing and financing activities        |                                                                                                     |                                                 |                                           |         |                              |         |       |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Issuance of common stock to acquire a note receivable                                               |                                                 | $                                         | 20,000  |                              |         | $      |      |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Issuance of common stock and a note payable to a
related party to acquire investments in businesses |                                                 | $                                         | 961,629 |                              |         | $      |      |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Issuance of common stock in payment of expenses                                                     |                                                 | $                                         |        |                              |         | $      | 4,320 |      

The accompanying notes are an integral part of these consolidated financial statements.

F-6



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##### Table of Contents



1ST REALTY INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A  SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.



| |                                     
| | ------------------------------------
| | 1.Basis of presentation and business



| |  |  | 1st Realty Investments (formerly First National Realty Associates Nevada,
Inc.) (the Company) is an Arizona-based company that was formed in Georgia
in October 1988, and became a publicly-held company through a merger into
Emphatic Mergers, Inc. a publicly-held corporation on April 11, 1990. The
name of the corporation was changed from First National Realty Associates,
Inc. to 1st Realty Investments on July 13, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company was founded with the intended purpose of becoming primarily a
national residential real estate brokerage company, focusing on relatively
affluent markets in geographically diverse market areas. Between 1988 and
1991, the Company grew primarily through the acquisition of other real estate
brokerage companies in multiple states. However, principally due to the
downturn in the real estate industry in the early 1990s, the Company was
unable to generate profitable operations. On April 6, 1992, the Company filed
a voluntary petition in the United States Bankruptcy Court for the District
of Georgia to reorganize under Chapter 11 of the United States Bankruptcy
Code (the Bankruptcy Code). On January 21, 1993, the Companys Chapter 11
case was voluntarily converted to a case under Chapter 7 of the Bankruptcy
Code. All of the Companys assets were subsequently liquidated and the
proceeds distributed, and the bankruptcy was dismissed on September 27, 1994.
From that date through the end of fiscal 2000, the Company had no operations.
It did, however, incur approximately $51,000 in administrative and legal
expenses during that time. The Company paid for these costs either by issuing
common stock or through advances it received from Great Western Land and
Recreation, Inc. (Great Western), formerly Amortibanc Management L.C.
|
|
| |  |  | In fiscal 2001, the Company began efforts to become an operating company once
again. On September 22, 2000, the Company purchased a $20,000 note
receivable issued by an unrelated company in connection with a sale of real
estate, bearing interest at 9%. This note receivable was purchased from Great
Western in exchange for 500,000 shares of the Companys common stock. On
December 29, 2000, the Company purchased ownership interests in nine entities
from Great Western in exchange for a $951,629 note payable and 1,000,000
shares of the Companys common stock. The most significant of these interests
were a 25.52% ownership in Laguna at Arrowhead Apartments L.L.C., (Laguna)
which owns an apartment complex in Phoenix, Arizona, and a 51% interest in
Firebird Financial L.L.C, (Firebird Financial) an entity that was formed to
provide second mortgage financing in the Houston, Texas area. Firebird
Financial has not funded any new loans since 1998, and does not have any
current plans to fund additional loans in the future. The other seven
entities had no operations and minimal net asset values.                                                                                                                                                                                                                                                       
|
|
|
| |  |  | The acquisitions of the ownership interests in the nine entities from Great
Western are accounted for by the purchase method of accounting. The purchase
price was allocated as follows: $876,332 to Laguna, $74,579 to Firebird
Financial and $10,718 to the remaining seven entities. The purchase price
was based on the estimated fair value of the entities acquired based on an
independent appraisal of Laguna and managements estimates of the values of
the other entities. The 25.52% interest in Laguna is being accounted for on
the equity method since acquisition and the accounts of Firebird Financial
are consolidated in these financial statements. Firebird Financial has a
deficit equity balance, therefore no minority interest is reflected in these
financial statements. The excess cost over the Companys interest in the net
equity of Laguna is included in the investments in unconsolidated company
on the balance sheet and is being amortized over the life of the Laguna
apartment complex. A partnership controlled by the Chairman of the Companys
board of directors owns 1.82% of Laguna. Ownership of the remaining 72.66%
of Laguna is by 28 other unaffiliated investors. Pro forma information for
the fiscal year ended August 31, 2001 follows (unaudited):                                                                                       
|




|                                                        |                        |   |            |            |          |  |           |          |                       |  |   |        |  |   |       |            |  
|------------------------------------------------------- | ---------------------- | - | ---------- | ---------- | -------- |  | --------- | -------- | --------------------- |  | - | ------ |  | - | ----- | ---------- | -
|                                                        |                        |   |            |            |          |  | Purchased |          | Pro forma adjustments |  |   |        | 
|                                                        |                        |   | 1st Realty |            | entities |  | (1)       |          | Total                
|                                                        |                        |   |            |            |          |  |           |          |                      
|                                                        | Interest income        |   | $          | 18,898     |          |  | $         | 30,282   |                       |  | $ |       |  |   | $     | 49,180     |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Operating expenses     |   |            | 126,848    |          |  |           | 98,893   |                       |  |   |       |  |   |       | 225,741    |  
|                                                        |                        |   |            |            |          |  |           |          |                       |  |   |        |  |   |       |           
|                                                        | Income from operations |   |            | (107,950   | )        |  |           | (68,611  | )                     |  |   |       |  |   |       | (176,561   | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other income (expense) |   |            | (135,129   | )        |  |           | (52,290  | )                     |  |   | 31,721 |  |   |       | (155,698   | )
|                                                        |                        |   |            |            |          |  |           |          |                       |  |   |        |  |   |       |           
|                                                        | Net loss               |   | $          | (243,079   | )        |  | $         | (120,901 | )                     |  | $ | 31,721 |  |   | $     | (332,259   | )
|                                                        |                        |   |            |            |          |  |           |          |                       |  |   |        |  |   |       |           
|Diluted net loss per common and
common equivalent share |                        | $ | (0.01      | )          |          |  |           |          |                       |  |   |        |  | $ | (0.02 | )         
|                                                        |                        |   |            |            |          |  |           |          |                       |  |   |        |  |   |       |           
|                                                        | Shares outstanding     |   |            | 17,154,141 |          |  |           |          |                       |  |   |        |  |   |       | 17,518,525 |  
|                                                        |                        |   |            |            |          |  |           |          |                       |  |   |        |  |   |       |           




F-7



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##### Table of Contents





| |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Great Western is a related company. Jay Torok, the Chairman of the board of
directors, is also the Chairman, President and Chief Executive Officer of
Great Western. William Szilagyi, the President and a member of the board of
directors is also the Senior Vice President of Great Western. Prior to
September 2000, Great Western owned 6.2% of the Companys common stock. As a
result of the issuance of common stock to Great Western in September 2000 and
December 2000 discussed above, Great Western owns 14.3% of the Companys
common stock as of September 30, 2002.
|
|
| |  |  | The accompanying consolidated financial statements include the accounts of
the Company and its wholly- and majority-owned subsidiaries. Investments in
companies that represent 20% to 50% of the ownership interest are accounted
for on the equity method. Investments in companies that represent less than a
20% ownership interest are accounted for on the cost basis. All material
intercompany accounts and transactions have been eliminated.                                                                                                                             



| |                
| | ---------------
| | 2. Income taxes



| |  |  | Income taxes are accounted for using the asset and liability method. Under
this method, deferred income tax assets and liabilities are recognized for
the future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which these temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
A valuation allowance is provided for deferred tax assets that are not
expected to be recovered from future operations. At August 31, 2001, the
Company has approximately $13,932,000 of tax loss carryforwards, which expire
on various dates through 2021, to offset future federal taxable income. No
tax benefit has been recognized, as use of the net operating loss is not
assured.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                   
| | ------------------
| | 3.Use of estimates



| |  |  | In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is responsible
for making estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements, and reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                   
| | ------------------
| | 4.Cash equivalents



| |  |  | For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                         
| | ------------------------
| | 5.Property and equipment



| |  |  | Property and equipment, consisting of office furniture and equipment, is
recorded at cost and is depreciated over useful lives of three to five years
using the straight-line method. Accumulated depreciation totaled $3,667 at
August 31, 2001. Expenditures for maintenance and repairs are charged to
operations in the year in which the expense is incurred.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                 
| | ----------------
| | 6.Loss per share



| |  |  | Basic loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during the period. Diluted loss per share
incorporates the incremental shares issuable upon the assumed exercise of
stock options. The number of incremental shares from the assumed exercise of
stock options is calculated by applying the treasury stock method. For the
fiscal years ending August 31, 2001 and 2000, the shares issuable upon the
exercise of the stock options which were not included in the calculation
because they were antidilutive were 750,000.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                            
| | ---------------------------
|
|
| | 7. Stock-based compensation



| |  |  | The Company measures compensation expense relating to employee stock awards
in accordance with Accounting Principles Board Opinion No. 25 Accounting for
Stock Issued to Employees (APB 25). The Company measures compensation
expense relating to non-employee stock awards in accordance with Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123).
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8



---



##### Table of Contents





| |                                    
| | -----------------------------------
| | 8. Recent accounting pronouncements



| |  |  | In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets: (SFAS 144). SFAS 144 requires that all
long-lived assets (including discontinued operations) that are to be disposed
of by sale be measured at the lower of book value or fair value less cost to
sell. Additionally, SFAS 144 expands the scope of discontinued operations to
include all components of an entity with operations that can be distinguished
from the rest of the entity and will be eliminated from the ongoing
operations of the entity in a disposal transaction. SFAS 144 is effective for
the Company as of January 1, 2002. The Company does not expect the
implementation of SFAS 144 to have a material effect on its financial
condition or results of operations.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE B  NOTES RECEIVABLE

Notes receivable consist primarily of second mortgage loans made to
individuals, which are reported net of unamortized discount of $42,311 and an
allowance for doubtful accounts of $110,301 at August 31, 2001. The notes have
original maturities of 3 to 5 years and bear interest at effective rates of
19.0% to 33.6%. Principal and interest are payable monthly based on 15-year
amortization schedules with the remaining balances due at maturity.

Notes receivable also includes a $20,000 note issued by an unrelated company in
connection with a sale of real estate, bearing interest at 9%, principal and
interest payable as lots are sold and released, with any outstanding balance
due in September 2003. This note receivable was purchased from Great Western in
September 2000 in exchange for 500,000 shares of the Companys common stock.

Maturities for notes receivable as of August 31, 2001 follow:

|                       |  |   |         | 
|---------------------- |  | - | ------- | 
|Year ending August 31, |  |   |         | 
|2002                   |  | $ | 36,064  | 
|                      
|                      
|                      
|                      
|2003                   |  |   | 164,870 | 
|                      
|                      
|                      
|                      
|2004                   |  |   | 20,000  | 
|                       |  |   |         | 
|                       |  | $ | 220,934 | 
|                       |  |   |         | 

NOTE C  INVESTMENT IN UNCONSOLIDATED COMPANY




On December 29, 2000, the Company acquired a 25.52% ownership in Laguna at
Arrowhead Apartments L.L.C., (Laguna) which owns an apartment complex in
Phoenix, Arizona. This investment is accounted for using the equity method.
Under the equity method, the Companys investment balance approximates the
Companys original cost adjusted for its equity interest in the earnings and
losses of Laguna since December 29, 2000, the date of acquisition. At August
31, 2001, the Companys investment in Laguna totaled $760,987. Lagunas fiscal
year ends on December 31. Summarized financial information for Laguna as of
August 31, 2001 follows (unaudited):







|                                           |                        |              |           |           |           | 
|------------------------------------------ | ---------------------- | ------------ | --------- | --------- | --------- | 
|As of August 31, 2001                      |                        |              |           |          
|                                          
|                                          
|                                          
|                                          
|                                           | Current assets         |              | $         | 245,920   |          
|                                          
|                                          
|                                          
|                                          
|                                           | Noncurrent assets      |              |           | 9,507,671 |          
|                                           |                        |              |           |          
|                                           |                        | Total assets |           | $         | 9,753,591 | 
|                                           |                        |              |           |          
|                                           | Current liabilities    |              | $         | 204,141   |          
|                                          
|                                          
|                                          
|                                          
|                                           | Noncurrent liabilities |              |           | 9,441,948 |          
|                                          
|                                          
|                                          
|                                          
|                                           | Members capital       |              |           | 107,502   |          
|                                           |                        |              |           |          
|                                           |                        | $            | 9,753,591 |          
|                                           |                        |              |           |          
|For the eight months ended August 31, 2001 |                        |              |           |          
|                                          
|                                          
|                                          
|                                          
|                                           | Revenues               |              | $         | 1,003,359 |          
|                                          
|                                          
|                                          
|                                          
|                                           | Net loss               |              |           | (384,592  | )        




F-9



---



##### Table of Contents



NOTE D  PAYABLES TO RELATED ENTITIES

Related entity payables are as follows at August 31,2001:

|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Great Western (1)        |  | $ | 1,051,688 | 
|                        
|                        
|                        
|                        
|JPMH Ltd Partnership (2) |  |   | 13,846    | 
|                         |  |   |           | 
|                         |  | $ | 1,065,534 | 
|                         |  |   |           | 



---

|(1) |  | The advances from Great Western were made primarily to finance the
purchase of the Companys ownership interests in Laguna and Firebird
Financial from Great Western on December 29, 2000. These advances bear
interest at 8% per annum beginning in January 2001 and are payable on
demand.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | JPMH Ltd. Partnership holds a 49% ownership interest in Firebird
Financial.                                                                                                                                                                                                                 

NOTE E  FINANCIAL INSTRUMENTS

The carrying amounts reflected in the consolidated balance sheet for notes
receivable approximate fair value considering the quality of the credit,
payment terms and short remaining maturities. A reasonable estimate of the fair
value for payables to related entities cannot be made due to the common control
between the entities.

NOTE F  STOCK OPTIONS

The Company has adopted the 1999 Stock Option Plan (the Plan), an incentive
plan for key employees and directors. A total of 1,000,000 shares of the
Companys common stock have been reserved for issuance under the Plan. The plan
is administered by the Board of Directors or a committee thereof, which is
authorized to, among other things, select the key employees and directors who
will receive grants and determine the exercise prices and vesting scheduled of
the options. Options expire no more than ten years after the date of grant.
Upon termination of an option holders employment, all unvested options will
immediately terminate and vested options will generally remain exercisable for
a period of three months after date of termination (one year in case of
disability, three years in case of death).

As of August 31, 2001, there were 750,000 options outstanding under the Plan.
The options were granted in 1999 and are fully exercisable. These options have
a remaining contractual life of 8.2 years as of August 31, 2001, expire in 2009
and have an exercise price per share of $0.10. The pro forma information
required under SFAS 123 is not included as it has no impact on loss per share.

NOTE G  TREASURY STOCK

Treasury stock consists of previously issued shares that were returned to the
Company during and shortly after the Companys bankruptcy proceedings. These
shares were returned as part of litigation settlements at the time of
bankruptcy.

NOTE H  COMMITMENTS AND CONTINGENCIES

From time-to-time the Company is involved in litigation arising in the normal
course of business. The Company is not a party to any outstanding litigation as
of August 31, 2001 or as of the filing date of this report, other than as
discussed in Note J.

NOTE I  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Consolidated quarterly financial information for fiscal 2001 and 2000 is as
follows:

|                                                |  |             |        |             |  |        |          |           |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | ----------- | ------ | ----------- |  | ------ | -------- | --------- |  | - | ------- | - |  | - | ------- | -
|                                                |  | Fiscal 2001
|                                                |  |            
|Quarter ended                                   |  | November 30 |        | February 28 |  | May 31 |          | August 31
|                                                |  |             |        |             |  |        |          |          
|Revenue                                         |  | $           | 340    |             |  | $      | 13,479   |           |  | $ | 2,479   |   |  | $ | 2,600   |  
|                                                |  |             |        |             |  |        |          |           |  |   |         |   |  |   |         |  
|Operating loss                                  |  | $           | (4,660 | )           |  | $      | (97,862  | )         |  | $ | (1,841  | ) |  | $ | (3,587  | )
|                                                |  |             |        |             |  |        |          |           |  |   |         |   |  |   |         |  
|Net loss                                        |  | $           | (4,660 | )           |  | $      | (128,537 | )         |  | $ | (53,081 | ) |  | $ | (56,801 | )
|                                                |  |             |        |             |  |        |          |           |  |   |         |   |  |   |         |  
|Net loss per common and
common equivalent share |  | $           |       |             |  | $      | (0.01    | )         |  | $ |        |   |  | $ |        |  
|                                                |  |             |        |             |  |        |          |           |  |   |         |   |  |   |         |  

|                                                |  |             |        |             |  |        |      |           |  |   |     |   |  |   |      |  
|----------------------------------------------- |  | ----------- | ------ | ----------- |  | ------ | ---- | --------- |  | - | --- | - |  | - | ---- | -
|                                                |  | Fiscal 2000
|                                                |  |            
|Quarter ended                                   |  | November 30 |        | February 28 |  | May 31 |      | August 31
|                                                |  |             |        |             |  |        |      |          
|Revenue                                         |  | $           |       |             |  | $      |     |           |  | $ |    |   |  | $ |     |  
|                                                |  |             |        |             |  |        |      |           |  |   |     |   |  |   |      |  
|Operating loss                                  |  | $           | (3,857 | )           |  | $      | (100 | )         |  | $ | (83 | ) |  | $ | (965 | )
|                                                |  |             |        |             |  |        |      |           |  |   |     |   |  |   |      |  
|Net loss                                        |  | $           | (3,857 | )           |  | $      | (100 | )         |  | $ | (83 | ) |  | $ | (965 | )
|                                                |  |             |        |             |  |        |      |           |  |   |     |   |  |   |      |  
|Net loss per common and
common equivalent share |  | $           |       |             |  | $      |     |           |  | $ |    |   |  | $ |     |  
|                                                |  |             |        |             |  |        |      |           |  |   |     |   |  |   |      |  

F-10



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##### Table of Contents



NOTE J  SUBSEQUENT EVENTS

Great Western entered into a merger agreement with quepasa.com as of August 6,
2001. In October 2001, in order to induce Great Western to amend and extend the
original merger agreement, quepasa.com loaned Great Western $500,000 (the
loan). This loan was secured by 1st Realtys investment in Laguna. In February
2002, the merger agreement was terminated. The merger agreement provided for a
termination fee of $500,000 as liquidated damages under certain circumstances.
Great Western believes that it is entitled to this termination fee, which would
result in the loan being deemed paid in full, and has filed a declaratory
judgment action against quepasa.com on that issue. quepasa.com has filed a
counterclaim, alleging that it is entitled to the termination fee and seeking
to foreclose on the loan. quepasa.com has named 1st Realty as a third-party
defendant to its counterclaim because 1st Realtys investment in Laguna was
pledged as collateral for the loan. Management does not believe that the
ultimate resolution of this matter will have a material adverse effect on 1st
Realtys financial condition, results of operations or cash flows.

NOTE K  RELATED PARTY TRANSACTIONS




On September 29, 2000, the Company purchased a $20,000 note receivable, issued
by an unrelated company in connection with a sale of real estate, bearing
interest at 9%. This note receivable was purchased from Great Western in
exchange for 500,000 shares of the Companys common stock. On December 29,
2000, the Company purchased ownership interests in nine entities from Great
Western in exchange for a $951,629 note payable and 1,000,000 shares of the
Companys common stock. These interests included a 25.52% ownership in Laguna
at Arrowhead Apartments L.L.C. (Laguna), which owns an apartment complex in
Phoenix, Arizona, and a 51% interest in Firebird Financial L.L.C. (Firebird
Financial), an entity that was formed to provide second mortgage financing in
the Houston, Texas area. Firebird Financial has not funded any new loans since
1998, and does not have any current plans to fund additional loans in the
future. The other seven entities had no operations and minimal net asset
values. In addition, Great Western charges the Company $900 per month for
management services provided to Firebird Financial. At August 31, 2001,
advances from Great Western totaled $1,051,688, primarily to finance the
purchase of the Companys ownership interests in Laguna and Firebird Financial
from Great Western. The Company has pledged its interest in Laguna as
collateral for a $500,000 loan Great Western received from a third party (see
Note J).




Jay Torok, the Chairman of the board of directors, is also the Chairman,
President and Chief Executive Officer of Great Western. William Szilagyi, a
member of the board of directors is also the Senior Vice President of Great
Western.

The Company utilizes office space at the office of Great Western. The Company
is using this space free of charge.

F-11



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##### Table of Contents






2001 10-KSB EXHIBIT INDEX

|        |  |                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                        
|No.     |  |                                                                                                                                                                                        
|        |  |                                                                                                                                                                                        
|3.1     |  | Articles of Incorporation of First National Realty Associates, Inc. (Incorporated by
reference to Exhibit 8 to Registration Statement on Form S-18 (No. 33-30679-NY))                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|3.2     |  | Agreement of Merger of First National Realty Associates, Inc. into Emphatic Mergers
(Incorporated by reference to Exhibit 14 to Registration Statement on Form S-18 (No.
33-30679- NY))
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|3.3     |  | By-Laws of First National Realty Associates, Inc. (Incorporated by reference to Exhibit 9
to Registration Statement on Form S-18 (No. 33-30679-NY))                                    
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.1    |  | Promissory Note, dated September 22, 2000 from First Commerce Marketing L.L.C. to 1st
Realty Investments, Inc.                                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.2    |  | Promissory Note, dated December 31, 2000, from 1st Realty Investments, Inc to Amortibanc
Management L.C.                                                                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.3    |  | Assignment of Membership Interest of Laguna Investments L.L.C., dated December 29, 2000,
from Amortibanc Management L.C. to 1st Realty Investments, Inc.                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.4    |  | Assignment of Membership Interest of Firebird Financial L.L.C., dated December 29, 2000,
from Amortibanc Management L.C. to 1st Realty Investments, Inc.                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.5    |  | Assignment of Membership Interest of Arizona Legacy Ranches L.L.C., dated December 29,
2000, from Amortibanc Management L.C. to 1st Realty Investments, Inc.                           
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.6    |  | Assignment of Membership Interest of F Troops L.L.C., dated December 29, 2000, from
Amortibanc Management L.C. to 1st Realty Investments, Inc.                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.7    |  | Assignment of Membership Interest of Bosque del San Antonio L.L.C., dated December 29,
2000, from Amortibanc Management L.C. to 1st Realty Investments, Inc.                           
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.8    |  | Assignment of Membership Interest of Aquarius Mountain Water & Mineral L.L.C., dated
December 29, 2000, from Amortibanc Management L.C. to 1st Realty Investments, Inc.                
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.9    |  | Assignment of Membership Interest of Prom Partners L.P., dated December 29, 2000, from
Amortibanc Management L.C. to 1st Realty Investments, Inc.                                      
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.10   |  | Assignment of Membership Interest of Willow Springs Water L.L.C., dated December 29, 2000,
from Amortibanc Management L.C. to 1st Realty Investments, Inc.                             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|10.11   |  | Assignment of Membership Interest of Houston Damage Control L.L.C., dated December 29,
2000, from Amortibanc Management L.C. to 1st Realty Investments, Inc.                           
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|21      |  | List of Subsidiaries                                                                                                                                                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                        
|       
|       
|       
|       
|99.1    |  | Risk Factors                                                                                                                                                                           

F-12